Construction looks to private sector to offset Government spending cuts

Chart 1: Construction Output (above)

Whilst wet weather and the disruption of the Jubilee celebrations will have played their part, the sharp 5.2% fall in construction output during the second quarter is a stark illustration of the tough trading conditions currently facing the industry as cut backs in public sector investment over the last two years flow through to less work on site. Construction output during the second quarter was nearly 10% down on a year earlier. Public sector projects will remain scarce during the near and medium term; Government funding remains tight and Glenigan has recorded a continued decline in the number of public sector projects in the development pipeline.

In contrast Glenigan has recorded an encouraging pick-up in the value of private housing, office and industrial projects starting on site during the first half of 2012. Furthermore the value of such schemes securing detailed planning approval has also strengthened and these sectors are poised to be important growth areas for the industry over the next 18 months. 

Accordingly, whilst overall construction output will remain weak during the second half of this year and during 2013, the strengthening private sector development pipeline should help to lift industry confidence over the coming months. However, this growth is in turn dependent upon a strengthening in investor and consumer confidence, both of which remain fragile. Renewed set-backs in the wider economy or financial markets could jeopardise the forecast private sector upturn.